Oracle, HP lock horns over Hurd and trade secrets – who will win and why? (2)

Follow us

According to Mark Lemley, professor of law at Stanford University, HP's lawsuit "won't work in California" unless HP can "show real evidence that mark Hurd is about to use its secrets at Oracle." Simply saying that trade secrets will inevitably be disclosed is not enough to persuade the court to look its way or enforce a non-compete agreement, Lemley, who specializes in intellectual property, said.

Agrees Frederick Baron, labor law expert at Cooley LLP. If HP cannot prove that Hurd has actually disclosed or used HP's proprietary information to give Oracle an unfair advantage in competition, its lawsuit will fail, Baron said, as the "inevitable use doctrine...is not well established in California or in many jurisdictions."

"California has a strong public policy against enforcing non-compete clauses," Baron said.

Moreover, "Oracle is assuming Mark Hurd can do his job based on his general know-how and talents," he added.

In other words, under California law, a company can't simply stop someone from joining a competitor, "even the most senior executives who may possess a great deal of confidential information," Michael Rosen, an attorney at Foley Hoag, said.

Though all the law experts have given HP little chance of winning the lawsuit, they feel that the matter most probably would be settled out of court that would oblige Hurd to recuse himself from making decisions on certain products or strategies for a period of time.

According to Creative Strategies Inc. analyst Tim Bajarin, HP only filed the lawsuit as it "had a fiduciary responsibility to sue Hurd to make sure he doesn't poach any HP customers."

"This is a normal business practice in cases like this," the analyst said.

Meanwhile, as much as it looks strange, this is not the first time companies have locked horns over their employees, least of all HP.

Last year, HP itself was on the other end of this type of case after it hired David Donatelli, a veteran of the data-storage industry from EMC Corp. The move prompted EMC to file a lawsuit that prohibited HP from temporarily letting Donatelli start work as an executive vice president. A court later ruled that Donatelli could work for HP, but under certain restrictions that split up some of his responsibilities.

In 2007, HP also had to pay printer maker Lexmark International Inc. $525,000 and agree that Bruce Dahlgren, who was hired to oversee HP's printer sales, would not recruit Lexmark employees and also not interfere with Lexmark's customer relationships for 1 and 1/2 years.

In recent years, other companies have also settled cases of similar nature.

While last year, Apple and IBM reached a settlement approved in federal court in White Plains, New York, that the former's engineering chief Mark Papermaster, who was an IBM executive, would not use or disclose confidential IBM information to his new employer, in 2005, Google and Microsoft settled an employment dispute over Google's hiring of former Microsoft Vice President Lee Kai-Fu to run a research facility in China. The confidential settlement was announced less than three weeks before a trial was scheduled to start in Seattle.

At 2.23PM (EDT), shares of Oracle were trading down 1.09 percent at $24. HP shares were down 3.96 percent at $38.34.